India's Tech Renaissance: Emerging trends and the $100 billion ambition of the ecosystem

A look into some of the exciting trends from the tech startup markets of India and Southeast Asia

Updated: May 21, 2024 12:19:45 PM UTC
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As a venture capitalist based in Silicon Valley, I made my first investment in India seventeen years ago. The company had developed a low-cost computer that it planned to sell to the Indian masses. The founding team was smart and motivated and was advised by some of the best scientific minds in the country. As a naive young investor, I assumed the Indian market would settle for a lower-functioning computer since the price was so compelling. We lost our complete investment in the company.

A lot has changed since my initial misadventure. India's technology landscape has evolved leaps and bounds, and low price is no longer the winning feature of software and products being built in India. Indian founders have developed an intrepidness and conviction that they can build world-beating companies from here. The Venture Capital ecosystem in the country has grown consequently to more than 1,500 VC firms backing over 16,000 startups.

While investing in the Southeast Asia and Indian markets, we meet entrepreneurs brimming with new ideas every day. What are some of the trends that we are most excited about?

Consumer Brands: Being digital is what matters

Traditionally, launching a new consumer brand was limited to the big boys like Hindustan Unilever or Godrej. It required a distribution infrastructure, marketing muscle, and an investment of at least Rs 100 crore. Today, a new brand can be launched at a fraction of this amount. Distribution is done through online marketplaces, and marketing is done on social media. As a result, we have seen new-age brands, which appeal to the millennial consumer. By leveraging digital channels for distribution and marketing, they can move faster to meet the evolving demands of the digital customer.

Artificial Intelligence to Replace BPOs? We don't think so

Much has been talked about how AI will displace BPOs. We believe AI will create new opportunities to leverage India's vast English-speaking workforce. While AI is becoming ubiquitous, most applications still require a human being for the last 10 percent. Therefore, we believe there is a huge investment opportunity in building new, AI-enabled technology services for large enterprises looking for cost-efficient automation solutions.

Make in India: From toys to semiconductors

The Make in India push started in products such as toys and auto components some years ago. The new ToysRUs store in Bandra likely has 70 percent of its products made in India. However, a shift of far bigger consequences is underway. Geopolitics is forcing countries to look for alternative supply chains for the semiconductor chip—a critical component in all smart devices and machines, from cars to cameras. Indian engineers have been designing semiconductors since Texas Instruments opened shop in Bengaluru in 1985. We strongly believe the time has come for some home-grown semiconductor companies.

Also Read- Can India truly become a global semiconductor hub?

EVs: Electric vehicles are just one part of the ecosystem

As India moves to its anticipated 40 percent EV penetration by 2030, an entire ecosystem is being designed and built to enable it. An electric scooter needs charging points that work with all types of bikes. EV companies need to integrate with mobile apps that leverage UPI to manage billing seamlessly. The local distribution company needs to ensure the load on the system is adequately balanced. These require technological innovations that will be sought after by other countries with attributes similar to ours: densely populated cities with overloaded energy grids.

Software of all variations

All businesses, whether spas, landscapers, auto repair shops, dentists, bed-and-breakfasts or construction companies, require unique software to run their businesses. This is "Vertical SaaS", which refers to software applications built to address the needs of a specific industry vertical. These startups go global from day one and thanks to video conferencing, a founder sitting in Noida can sell his software to a customer in Nebraska.

Also Read- From electric vehicles to electric vehicle batteries: A pivotal shift in focus of policymakers

Could this tech ecosystem be valued at over $100 billion by 2025? This number is achieved by just 100 or so "unicorns," which refer to private companies valued at $1 billion or more. But let us assume that some of the unicorns will not sustain their high valuations. The question then is whether there can be at least 1,000 Indian startups valued at $100 million or more. We at Vertex Ventures SEA and India believe the answer is— absolutely!

The author is the Managing Partner of Vertex Ventures SEA & India, which invests in early-stage startups across the region. The firm has backed more than 40 startups in India over the last 10 years.

The thoughts and opinions shared here are of the author.

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